KUALA LUMPUR (Dec 12): Classic Scenic Bhd has proposed to acquire a 51% stake in a shoes and clothing company to reduce the group’s dependence on its existing wooden picture frame moulding business.
The group also announced a proposed 30% private placement and the change of its corporate name to Hextar Retail Bhd.
In a filing with Bursa Malaysia on Tuesday, the group said it is acquiring the 51% stake in Redina Malaysia Sdn Bhd for RM35.7 million in cash from Perdanis Distribution (M) Sdn Bhd.
Redina is an importer, general merchant and dealer in, among others, shoes, clothing and articles with a focus on apparels and undergarments. It is the brand licensee for Renoma, Jockey, Moto Guzzi, Alfa Romeo, Valentino Creations, Nautica, Crocodile, Arnold Palmer and Beverly Hills Polo Club.
For the financial year ended March 31, 2023, Redina achieved a revenue of RM48.9 million and a profit after tax of RM4.9 million
“The purchase of Redina comes with a profit guarantee of RM12 million cumulatively for the period of two years, from Jan 1, 2024 to Dec 31, 2025, providing the group with an additional income stream in the near term,” said Classic Scenic managing director Eric Vo Nghia Huu.
The group said the acquisition will be executed in two tranches. The first tranche, representing 20% equity interest in Redina, will be acquired for RM14 million and will be funded using proceeds raised from the Classic Scemic's proposed private placement.
The second tranche covering the remaining 31% equity interest in Redina will be acquired for RM21.7 million and will be funded through internally generated funds and/or bank borrowings.
On Nov 20, Classic Scenic announced that its wholly-owned unit, Lim Ket Leng Marketing Sdn Bhd, had incorporated 10 wholly-owned subsidiaries to facilitate expansion into the food and beverage (F&B) business.
“The proposed diversification into apparel and F&B sector is a strategic initiative aimed at broadening our income streams by identifying and engaging in new viable businesses, thereby reducing the company’s dependence on its existing wooden business. The proposed diversification is expected to have a positive impact on the group’s financial performance, consequently enhancing Classic Scenic’s shareholders’ value,” said Vo.
On the private placement, Classic Scenic said it aims to raise about RM38.7 million through the issuance of 113.8 million new shares, representing 30% of the group's existing issued shares, to independent investors.
The issue price will be determined later based on the five-day volume-weighted average price of Classic Scenic shares immediately preceding the price fixing date with a discount of not more than 20%, the group said.
“With an indicative placement price of 34 sen per share, the proposed 30% private placement is expected to raise gross proceeds of approximately RM38.7 million," the group said, adding that it intends to allocate RM23.9 million for the F&B business expansion, RM14 million for the proposed acquisition of Redina and RM800,000 for the estimated expenses related to the proposals.
On the proposed change of name to Hextar Retail, the group said it was aimed at providing a new corporate identity and better reflect the group’s diverse core business and undertaking.
Shares in Classic Scenic settled unchanged at 41 sen, giving the group a market capitalization of RM155.54 million. Year to date, the stock has fallen by 43.84%.